Nexus between Education, Migration and Earnings of Migrants in Pakistan

Transcription

1 Internatonal Journal of Busness and Socal Scence Vol. 2 No. 4; March 2011 Nexus between Educaton, Mgraton and Earnngs of Mgrants n Pakstan Ghulam Sarwar PhD Scholar Department of Economcs, Unversty of Sargodha, Pakstan. Emal: sarwar41ss@hotmal.com Maqbool Hussan Sal Professor Department of Economcs, Unversty of Sargodha, Pakstan. Abstract The study examnes effect of educaton on decson to mgrate and on earnngs of mgrants wthn human captal framework usng LFS data. The results showed the probablty to mgrate ncreases wth educaton and age s an mportant determnant for mgraton; decson to mgrate dmnshes wth age. Human captal determnants, educaton and experence had a sgnfcant effect on earnngs of mgrants. Returns to educaton for mgrants ncrease as level of educatonal attanment rases. It mples that educaton and earnngs have a postve relaton. Concavty of earnngs-experence profle of mgrants shows earnngs of mgrants ncrease at decreasng rate. Keywords: human captal, mgraton, earnngs JEL Classfcaton: C13, J31 1. Introducton Investment n human captal mproves mental abltes of the ndvduals and ncreases ther productvty. Spendng on educaton by the ndvduals s consdered as an nvestment n human captal. Another form of human captal s the mgraton. Mgraton has been consdered a form of human captal by the economsts after the semnal work of Sjaastad (1962). The human captal theory suggests that earnngs of ndvduals depend on level of human captal endowments [Mncer (1974), Becker (1964)]. Besdes educaton and experence, mgraton also plays role n determnng earnngs of mgrants.mgraton nvolves costs followed by unsure returns n the future, so mgraton s an nvestment decson. The people nvest n ther sklls n order to maxmze the net present value of future earnngs [Becker (1962)]. Educaton s an mportant factor whch affects earnngs and decson to mgrate. Role of educaton as sgnalng devce rases securty of employment at orgn as well as destnaton. Educated people have more nformaton about jobs as compared to llterates [Srageldn et. al.(1984)]. Mgraton has always added to household earnngs. There s evdence that educaton ncreases chances of mgraton whch results n hgher earnngs 1. Low ncome of household and lack of employment opportuntes at orgn are man causes for nternal mgraton n Pakstan. Mgraton provdes employment opportuntes at destnaton whch results n well beng of household [Arf (2005)]. The am of present study s to analyze effect of educaton on decson to mgrate and on earnngs of mgrants. The study explans how human captal endowments affect earnngs of mgrants. Usually, returns to mgraton n terms of earnngs are estmated by usng ncome as dependent varable wth a set of explanatory varables. But mgraton decson s not a random outcome, wthout takng nto account the endogenous nature of mgraton decson results n selectvty bas. To avod ths problem, study used a model n whch decson to mgrate and earnngs are jontly determned. The study utlzes Labor Force Survey data whch s the most recent avalable data contanng nformaton on mgraton. In order to reach the objectve, the paper s structured as follows: Secton 2 revews the lterature on mgraton n Pakstan; Secton 3 dscusses the data, and presents the bref descrptve analyss of the nternal mgraton n Pakstan followed by the descrpton of the model Secton 4 provdes the econometrc specfcaton for the models of Mgraton decson rule and earnng functon of mgrants, Secton 5 presents and analyses the emprcal results and; Secton 6 concludes. 2. Lterature Revew Sjaastad (1962) consdered mgraton as an nvestment n human captal and suppled mcro foundaton for mgraton theory. For an ndvdual, mgraton s a ratonal decson. Todaro (1969) proposed a mgraton model, whch theorzed that mgraton based on ratonal behavor of economc agents, 1 Ahmad and Srageldn (1994), Ahmad (1998), Khan and Shehnaz (2000) and Memon (2005). 253

2 Centre for Promotng Ideas, USA Mgraton s possble only f wages n rural areas are less than urban sector. Harrs and Todaro (1970) provded a model whch suggested that mgraton s due to expected dfference n rural urban returns rather than actual dfference. Accordng to ther model, mgraton s seen as a cost-beneft process. Irfan et. al (1983) analyzed mgraton flows n Pakstan at nternal and nternatonal level. The study concluded that nternal mgraton was a long dstance fact and ts drecton was from rural to urban areas. Irfan (1986) studed the lnk among mgraton, economc growth and development n Pakstan. The study found that females mgrate for marrages. Educaton and mgraton were postvely related. Ahmad and Srageldn (1993) ntroduced a theoretcal framework for emprcal verfcaton of human captal model of nterval mgraton. The study found that decson to mgraton was functon of age, educaton and choce of occupaton. Unversty graduates, professonal and experenced workers were more nclned towards mgraton. Ahmad and Srageldn (1994) analyzed effect of nternal mgraton on earnngs of mgrants n Pakstan. Mgraton duraton varables were used n Mnceran earnng functon to test learn-as-you-go hypothess. Results based on Populaton, Labor Force and Mgraton Survey (PLM) ( ) data showed that earnngs of those mgrants, who had passed longer tme perod after mgraton, were relatvely more than the recent mgrants. Ahmad (1998) evaluated sources of earnng dfferences between mgrants and non-mgrants. The performance of mgrants was found better than the non-mgrants on account of ther educaton. Professonal mgrants earned more than other categores mgrant workers.khan and Shehnaz (2000) dentfed the determnants of nternal mgraton n Pakstan. They found educaton, techncal and vocatonal tranng ncreases probablty of mgraton. Mgraton was more evdent for females and t was hghest among professonal and post graduates. Memon (2005) found postve effect of age and rural and urban wage dfferental on mgraton. Marrage and ownershp of agrcultural land had a negatve effect on decson to mgrate. The study also found that educaton had postve and sgnfcant effect on earnngs of mgrants and marred earned more than unmarred. 3. Data Source and Model Ths secton dscusses the source of data and gves bref descrptve analyss of data related to mgrants. Ths secton dentfes only nternal mgraton pattern n terms of provncal and regonal level. Data used for the present study s from Labor Force Survey (LFS) of Pakstan. Mgraton has been defned as the populaton s movement from one admnstratve dstrct to another admnstratve dstrct at any tme of ther lves and excludes the ones moved wthn the current dstrct [(LFS) ]. The sample sze of 10 year of age and over n (LFS) was , out of whch 87.42% were classfed as non-mgrants and 12.58% were mgrants. Majorty of mgrants (65.47%) were lvng n urban areas. From these mgrants, the most of mgrants were from Punjab (58%) followed by Snd (24%). Rate of mgraton n Balochstan s very low, whch s about 3%. The dstrbuton of mgrants ndcates that nflow of mgrants s hgher towards urban areas of all provnces. The profles of mgrants n term of sex ponts out that female mgrant (54.05%) were more as compared to ther male counterpart (45.95%) n our sample [see Table 1 to 4 n appendx]. To nvestgate the relatonshp of educaton and earnngs of mgrants, analyss s restrcted to the mgrants aged between 15 and 65 years. The restrcted sample conssts of mgrants out of whch 3864 are earners. The Theoretcal Model The model s based on the dea that mgraton s an nvestment n human captal. The ndvdual, who mgrates, compares benefts and costs of mgraton. It means mgraton not only depends on dfferences n gans of change n locaton but also on costs of mgraton. So, f gans at orgn denoted by R 1, expected gans at new locaton denoted by R 2 and cost of mgraton denoted by C, then th ndvdual wll move f R 2- R1- C > 0.e f expected gans are postve then mgraton takes place otherwse not. From above nformaton mgraton decson rule can be formulated as follow: Let 254 I =R - R - C (1) 2 1 If I >0 then mgraton and f I 0 then stay I are expected gans known to ndvdual. Snce gans and costs at orgn or at new locaton depend on personal characterstcs of ndvdual.e age, educaton, gender etc. After the ncluson of these factors mgraton decson rule s as under:

3 Internatonal Journal of Busness and Socal Scence Vol. 2 No. 4; March 2011 I δ Z e = +. (2) Z denotes varables whch affect gan and cost of mgraton, whch n turn nfluence mgraton decson. e s error term. But (2) contans an unobservable latent varable I and we can observe only I =1 when I > 0 I =0 when I 0 So mgraton decson rule s as under: 1 when I > 0 M= 0 when I 0 Ths mgraton decson rule can be estmated by probt model as follows. Pr ob( M ) = φ( α + β Z + ε ) Where M s a bnary varable, whch s equal to 1 for mgrant and 0 otherwse. The matrx Z conssts of varables thought to be determnants of mgraton.e. age, gender, area and provnce of resdence, and human captal dummy varables. The vector β s the correspondng vector of estmated coeffcents (partal dervatves are evaluated at the mean values of regressors to estmate margnal effects). Earnngs of Mgrants In the lght of aforementoned argument, we know that earnngs of mgrants are condtonal on observable value of I. So, earnng functon of mgrants may be expressed as E(Y M = 1) = β + β Z + E( u M = 1) 0 1 Estmaton of ths functon by usng OLS results n nconsstent estmates because of truncaton of sample and here E( u M = 1) 0. Heckman (1979) two steps method provdes consstent estmates of earnng equaton; earnng functon of mgrants under ths method s formulated as E(Y M = 1) = β0 + β Z 1 + β2λ + v λ s selectvty term, known as nverse Mll`s rato and error term s now normally dstrbuted. 4. Methodology 4.1 Decson to Mgraton To fnd out educaton as determnant of nternal mgraton, bnary dependent varable s used n probt model. Bnary dependent varable represents mgrant and non-mgrant status of respondent. The specfcaton of the model wth educatonal dummes varables 2 s as follows: Mg=f(Age,Agesqr,Prm,Md, Matrc,Inter,BA,Prof,Postgrad, Male,Urban, Snd, NWFP, Baloch) 4.2 Mnceran Earnngs Functon of Mgrants The model s specfed to nclude personal characterstcs of mgrants lke educaton level, age (proxy for experence), gender of mgrants and provncal dummes. Ln(ncome)=f(Age,Agesqr,Prm,Md,Matrc,Inter,BA,Prof,Postgrad,Male,Urban, Snd, NWFP, Baloch), Where Mg = dummy varable equal to 1 for mgrants and zero otherwse Ln(ncome) = Monthly ncome of mgrants Age = age of respondent n years Agesqr = square of age of respondent Prm = dummy varable equal to 1 f respondent`s completed hghest grade s prmary and zero otherwse Md = dummy varable equal to 1 f respondent`s completed hghest grade s mddle and zero otherwse Matrc = dummy varable equal to 1 f respondent`s completed hghest grade s matrc and zero otherwse Inter = dummy varable equal to1 f respondent`s completed hghest grade s ntermedate and zero otherwse 2 Snce queston about educaton was coded n categores of educatonal level. The respondent possesses educaton less than prmary or no educaton s reference category. 255

4 Centre for Promotng Ideas, USA BA = dummy varable equal to 1 f respondent has a bachelor degree and zero otherwse Prof = dummy varable equal to 1 f respondent has a degree n engneerng, medcne, computer or agrculture and zero otherwse Postgrad= dummy varable equal to 1 f respondent has a MA/MSc or M.Phl degree and zero otherwse Male = dummy varable equal to 1 for male and zero otherwse Urban = dummy varable equal to 1 for urban respondents and zero otherwse Snd = dummy varable equal to 1 f respondent lve n Snd provnce and zero otherwse NWFP = dummy varable equal to 1 f respondent lve n NWFP provnce and zero Otherwse Baloch= dummy varable equal to 1 f respondent lve n Balochstan provnce and zero Otherwse 5. Emprcal Results For the estmaton of Mnceran Earnng model of mgrants whch s free from selecton bas, frst mgraton decson model s estmated. Estmaton of mgraton decson model provdes Inverse Mll`s rato (λ) 3. The results of mgraton decson rule model are presented n Table5. The postve coeffcent of age shows that probablty to mgrate ncreases as the age of mgrant ncreases. Negatve and sgnfcant coeffcent of age square ndcates that decson to mgrate dmnshes wth age. The results ndcate that educaton has a sgnfcant nfluence on probablty of mgraton. These results reveal that mgraton s selectve wth respect to educaton. The negatve coeffcent of male dummy varable reveals that the females are relatvely more nclned n the drecton of mgraton as compared to males. So far as role of martal status s concerned n mgraton decson, the results show that probablty of mgraton s hgher for marred respondents. The coeffcent of regonal dummy varable Urban ndcates that urban resdents have hgher probablty to mgrate as compared to rural. Smlarly, probablty to mgrate s lower among those who lve n Snd, NWFP or Baluchstan as compared to Punjab provnce, whch s reference category. It shows that mgraton decson was nduced by educaton to a large extent. Mnceran Earnngs Functon of Mgrants As we see above that educaton effects mgraton decson.e. hgher s the educaton, the more lkely an ndvdual wll mgrate. Table 6 reports the OLS estmates of Mnceran Earnngs Functon of mgrants wth and wthout correcton for selecton bas. If we concentrate on selectvty results, t shows that coeffcents of all dummes of educaton level are hghly sgnfcant. The postve sgns of the coeffcents ndcate that educaton brng a valuable ncrease n ncomes of mgrants n Pakstan. The statstcally sgnfcant coeffcents of educatonal dummes verfy the postve relatonshp of earnngs and schoolngs. Mgrants wth prmary and mddle school educaton earn 13.2% and 23.9% more than those mgrants who are llterates or wth less than prmary. Wth post graduaton mgrants earn 30% more than the graduates. Professonals gan 9% less than post graduates. These results suggest that human captal accumulaton s a major determnant of earnngs of mgrants.e. ncome ncrease wth hgher level of educatonal attanment. In order to examne earnngs-experence profle of mgrants, age and ts square was used as proxy for experence, n specfcaton of earnngs functon of mgrants. The estmated sgns on age and age-square are consstent wth human captal theory. The negatve sgn of age-square coeffcent shows concavty of earnngs-experence profle of mgrants. Mgrant females face a sgnfcant dsadvantage n labor market; on average females earn 40% less than males n term of monthly ncomes. The urban mgrants earn more as compared to ther rural counterparts. The results of provncal dummes ndcate that those mgrants resde n the Punjab are better off than those lve n NWFP and Baluchstan. The nsgnfcant coeffcent on Snd suggests that mgrants n Snd do not earn sgnfcantly more than Punjab`s mgrant. The degree of bas can be seen by comparson of results wth and wthout correcton for selecton bas. Results of both the methods ndcate estmates are more or less dentcal n terms of sgns and sgnfcance. Whle returns to educaton are hgher for prmary, mddle, matrc and ntermedate for selectvty corrected results, but for graduaton, post graduaton and professonal stuaton s reverse. 6. Conclusons Ths paper s an attempt to evaluate the effect of educaton on decson to mgrate and on earnngs of mgrants n Pakstan usng LFS data. Ths paper uses sample of mgrants and non-mgrants to estmate decson to mgraton rule model and sample of mgrant earners to estmate the Mnceran Earnng Functon. The mportant conclusons of the study are: 3 Estmaton of Inverse Mll`s rato s avalable n STATA. 256

5 Internatonal Journal of Busness and Socal Scence Vol. 2 No. 4; March 2011 a) As educaton s helpful n fndng the job, the results showed the probablty to mgrate ncreases as educaton ncreases. b) Age s an mportant determnant for mgraton. The negatve coeffcent of age square suggests that older workers have a weaker nclnaton to mgrate than younger or decson to mgrate dmnshes wth age. c) Human captal determnants, educaton and experence had a sgnfcant effect on earnngs of mgrants. d) Returns to educaton for mgrants ncrease as level of educatonal attanment rases. It mples that educaton and earnngs have a postve relaton. e) Concavty of earnngs-experence profle of mgrants shows earnngs of mgrants ncrease at decreasng rate. The results of mgraton decson rule model and Mnceran earnng functon are n favor of to conclude that educaton s an mportant determnant of mgraton decson as well as earnngs of mgrants n Pakstan. To a large extent, mgraton decson s nduced by educaton. References Ahmed, A. M. and Srageldn I. (1993), Soco-economc Determnants of Labour Moblty n Pakstan, The Pakstan Development Revew, 32:2, Ahmed, A. M. and Srageldn I. (1994), Internal Mgraton, Earnngs, and the Importance of Self-selecton, The Pakstan Development Revew, 33:3, Ahmed, A. M. (1998), Sources of Earnngs Dfferentals among Mgrants and Natves, The Pakstan Development Revew, 37:4, Becker, G. (1962). Investment n human captal: a theoretcal analyss. Journal of Poltcal Economy, 70, Becker, G. S. (1964), Human Captal New York: Natonal Bureau of Economc Research. Greenwood, M.J. (1975), Research on Internal Mgraton n the Unted States, Journal of Economc Lterature,13:2, Heckman, J. J. (1979), Sample Selecton Bas as a Specfcaton Error, Econometrca, 47(1), pp Irfan, M. (1986), Mgraton and Development n Pakstan: Some Selected Issues, The Pakstan Development Revew, 25:4, Irfan, M., Lonel D. and Arf G. M. (1983), Mgraton Patterns n Pakstan: Prelmnary Results from the PLM Survey, 1979, Pakstan Insttute of Development Economcs, Islamabad. (Studes n Populaton, Labour Force and Mgraton Project, Report No. 6.) Arf, G. M. (2005) Internal Mgraton and Household Well-beng: Myth or Realty. In Hsaya Oda (ed.) Internal Labour Mgraton n Pakstan. Insttute of Developng Economes, Japan External Trade Organsaton, Chba, Japan. Khan, A. H. and Shehnaz, L (2000), Determnants of Internal Mgraton n Pakstan: Evdence from the Labour Force Survey, , The Pakstan Development Revew, 39: 4, Memon, R. (2005) Determnants and Trends of Internal Mgraton n Pakstan. In Hsaya Oda (ed.) Internal Labour Mgraton n Pakstan. Insttute of Developng Economes, Japan External Trade Organsaton, Chba, Japan. Mncer, J. (1974), Schoolng, Experence and Earnngs, New York: Natonal Bureau of Economc Research. Mncer, J. (1979), Famly Mgraton Decsons, Journal of Poltcal Economy, 86:7, Nab, I.(1984), Vllage-end Consderatons n Rural-Urban Mgraton, Journal of Development Economcs, 14: Srageldn, I., Sherbny, N. and Serageldn, M. I.(1984), Sauds n Transton: The Challenges of a Changng Labor Market. Oxford: Oxford Unversty Press. Sjaastad, L. A. (1962), The Costs and Returns of Human Mgraton, The Journal of Poltcal Economy, 70:5, Todaro, M. (1969), A Model of Labour Mgraton and Urban Unemployment n Less Developed Countres, The Amercan Economc Revew, 59:1,

6 Centre for Promotng Ideas, USA Table 1: Dstrbuton of Populaton 10 years of age and over by Mgraton Status and Regon of Resdence Mgrant Non mgrant Total Urban 12,957 51,265 64,222 (20.18%) (79.82%) (100) [65.47%] [37.28%] [40.83%] Rural 6,833 86,253 93,086 (7.34%) (92.66%) (100) [34.53%] [62.72%] [59.17%] Total 19, , ,308 (12.58%) (87.42%) (100) Source: Labour Force Survey ( ), Federal Bureau of Statstcs, Government of Pakstan. Note: Values n parentheses are row-wse percentages. Values n brackets are column-wse percentages. Table 2: Dstrbuton of Populaton 10 years of age and over by Mgraton Status and Provnce Mgrant Non mgrant Total Punjab 11,535 62,763 74,298 (15.53%) (84.47%) (100) [58%] [46%] [47%] Snd 4,763 32,590 37,353 (12.75%) (87.25%) (100) [24%] [24%] [24%] NWFP 2,953 24,603 27,556 (10.72%) (89.28%) (100) [14.92] [17.89%] [17.52%] Balochstan ,562 18,101 (2.98%) (97.02%) (100) [2.72%] [12.77%] [11.51%] Total 19, , ,308 (12.58%) (87.42%) (100) Source: Labour Force Survey ( ), Federal Bureau of Statstcs, Government of Pakstan. Table 3: Dstrbuton of Mgrants by Provnce and Regon of Resdence Urban Rural Total Punjab 6,632 4,903 11,535 (57.49%) (42.51%) (100) [51.18%] [71.75%] [58.29%] Snd 4, ,763 (87.86%) (12.14%) (100) [32.3%] [8.46%] [24.07%] NWFP 1,725 1,228 2,953 (58.42%) (41.58%) (100) [13.31%] [17.97%] [14.92%] Balochstan (76.99%) (23.01%) (100) [3.2%] [1.81%] [2.72%] Total 12,957 6,833 19,790 (65.47%) (34.53%) (100) Source: Labour Force Survey ( ), Federal Bureau of Statstcs, Government of Pakstan. Note: Values n parentheses are row-wse percentages. Values n brackets are column-wse percentages.

7 Internatonal Journal of Busness and Socal Scence Vol. 2 No. 4; March 2011 Table 4: Dstrbuton of Mgrants by Sex and Regon of Resdence Male Female Total Urban 6,192 6,765 12,957 (47.79%) (52.21%) (100) [68.09%] [63.25%] [65.47%] Rural 2,902 3,931 6,833 (42.47%) (57.53%) (100) [31.91%] [36.75%] [34.53%] Total 9,094 10,696 19,790 (45.95%) (54.05%) (100) Source: Labour Force Survey ( ), Federal Bureau of Statstcs, Government of Pakstan. Note: Values n parentheses are row-wse percentages. Values n brackets are column-wse percentages. Table5: Probt Estmates of Mgraton Decson Rule Varables Coeffcents t-values Age Agesqr Educaton Prm Md Matrc Inter BA Prof Postgrad Male Urban Provnce Snd NWFP Baloch Constant Table 6: OLS Estmates for Mgrants n Pakstan Wthout Correcton Wth Correcton Varables Coeffcents t-values Coeffcents t-values age Agesqr Prm Md Matrc Inter BA Postgra Prof Male Urban Snd NWFP Bal Constant lamda Sgnfcant at 1%, Sgnfcant at 5 %, Sgnfcant at 10 % 259